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Gold price trades near $2,000 as inflation rises 7.9% in February, remaining at 40-year highs

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(Kitco News) Gold traded near the $2,000 an ounce level after inflation in the U.S. hit a new four-decade high in February, accelerating to 7.9% from a year earlier.

The U.S. Consumer Price Index (CPI) print of 7.9% matched market expectations that projected intensified price pressures after Russia's invasion of Ukraine at the end of last month. The most recent data follows January’s 7.5% annual gain.

On a monthly basis, the headline number was up at 0.8% in February after an advance of 0.6% in January, the U.S. Labor Department said on Thursday.

Core inflation, which strips out volatile food and energy costs, accelerated to 6.4% from a year ago, surprising on the upside. Meanwhile, the monthly increase met market expectations with an advance of 0.5%.

The biggest price increases were reported in gasoline, food, and shelter costs. “The gasoline index rose 6.6 percent in February and accounted for almost a third of the all items monthly increase; other energy component indexes were mixed. The food index rose 1.0 percent as the food at home index rose 1.4 percent; both were the largest monthly increases since April 2020,” the release stated.

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February’s inflation data is the last decisive data point ahead of the Federal Reserve’s interest meeting next week. The U.S. central bank Chair Jerome Powell testified last week that he would be supporting a traditional 25-basis-point hike on Wednesday despite the economic uncertainty surrounding the “unintended consequences” of the war in Ukraine and sanctions against Russia.

“Given what's set to be a stronger CPI profile ahead than previously thought, reflecting the jump in energy prices and renewed supply chain disruptions on the war in Ukraine, there is no need for the Fed to pause between the four 25bps rate hikes we expect this year, with the first one expected at next week's FOMC,” said CIBC Capital Markets economist Katherine Judge.

In an immediate reaction to the data, gold edged up to daily highs but was not able to hold the gains and ticked down with April Comex gold futures last trading at $2,002.40, up 0.69% on the day. 

Live 24 hours gold chart [Kitco Inc.]

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